The Effect of Green Technology and Environmental Regulation on Shadow Price

Shadow prices are the main concept of the cost-benefit analysis. In this paper, it is utilised as an index when a firm determines measures to environmental preservation. This paper formulizes an environmental shadow price which includes an environmental technical level and analyses the effect of input price, green technical levels, and environmental regulations on shadow price. This paper show that when firms improve their environmental technology, their emission levels don't increase and their environmental shadow price become high. Therefore firms may become positive in environmental preservation activity. Most firms have performed production activities and have taken environmental measures under the environmental regulation standard which regulation authorities have set. This paper analyses that if regulation authorities tighten up an environmental regulation standard, how environmental shadow prices change. It is shown that if regulation authorities tighten up environmental regulation, according to strengthening of regulation, firms will reduce inputs and control emission levels